Come January 2018, retailers can rejoice as they don't require to pay Merchant Discount Rate (MDR) charges to banks for every debit card payment they receive.

The
government's recent decision to abolish MDR for small and medium
retail merchants over the digital transactions through debit card up
to Rs 2000 has come as a welcome relief for thousands of retail
businesses across the country as they were finding hard to pay banks
from their pockets or charge extra from customers.

In
Focus

According
to industry sources, the demand for Point Of Sale (POS) transaction
machines from shop owners will go up sharply as the government's
decision to abolish MDR for two years from January 1, 2018 will
encourage more to approach banks to install POS machines at their
shops.

According
to Reserve Bank of India estimates, the government's push to
popularize cash-less transactions has borne results as the number of
POS machines used by merchants has gone up to 3 million from the
paltry 0.8 million machines a year ago.

Some
of the merchants, whom this writer had contacted, expressed hope that
such move would encourage more traders to adopt cashless transaction
to lessen their burden on handling cash.

"I
did not want to have POS machine earlier as I had no intention to
charge extra from my customers in the name of bank transaction
charges. But now, since the government has announced to bear the MDR
charges for transaction up to Rs 2000, I will approach my bank to
install a card transaction machine. For transactions above Rs 2000,
since the RBI has reduced the charges now, it will not have any
impact on our business in switching over to cashless transaction,"
says Sudhir Chandra, who owns a grocery store in George Town in
Chennai.

Welcoming
the government move, Mr Bhaskar Venkatraman, CEO and Director of
Millennium Soft-tech India, a pioneer in introducing POS machines to
Indian retailers says, "Withdrawing MDR is the right move to bring
India closer to cashless economy. We expect huge demand for POS
machines from retailers in the coming quarter as more merchants will
accept card transaction at POS counters. Presently, the government
has made debit card transaction free from MDR charges up to Rs 2000,
which I feel should also be extended to credit cards to encourage
more customers."

As
the average debit card transaction amount in India is below Rs 1500,
so accepting debit card will be almost equal to accepting cash for
small retailers. But the government should take measures to prevent
traders from misusing the subsidy, says Mohanraj, a customer at a
famous retail chain in Chennai.

After
demonetization and GST rollout, the government's recent move to
remove MDR charges for debit card transactions for two years is seen
as the right step to encourage digital payments among customers and
retail businesses.